View more on these topics

Rental arithmetic

Helen Pow looks at the growing number of people who are taking the leap to become professional landlords as the demand for rental property continues to grow.

Rental yields may be at record lows but the buy-to-let sector is still booming with growing numbers of investors looking to generate a second income or become full-time professional landlords.

A report by Alliance & Leicester says 21 per cent of buy-to-let investors are professional landlords and 11 per cent of landlords have given up their day jobs to manage their properties full-time.

A&L defines a professional landlord as a person who derives rental income equivalent to the national average wage, has a portfolio worth at least £1m or has been a landlord for at least two years and owns six to 20 properties.

The Royal Institution of Chartered Surveyors says the demand for rental property is rising at its fastest pace for nine years and landlords are having no difficulty letting their properties.

Chase de Vere Mortgage Management director Nick Gardner says: “Very few people are having trouble renting out their properties. There is significant demand for rental properties from people who cannot afford to buy or do not want to buy.”

Rooftop Mortgages business development director Alison Beech says increasing immigration, the rise in one-person households and the struggling first-time buyer market are all contributing to demand.

A&L director of mortgages Stephen Leonard says: “Demand for rented property has been growing steadily in recent years. With increasing numbers of professional landlords and most expecting to stay in the market for more than 10 years, buy to let is likely to remain an important part of the overall housing market.”

Beech says people are favouring buy to let over pensions and other investments because they prefer a tangible asset.

Gardner says: “People start off buying one property and see how that goes and most people have seen that property grow in value, which has given them money for a deposit on a second property. Many of my clients started off with one or two properties and now have hundreds.”

London & Country mortgage specialist James Cotton says the house price bonanza is spurring people on to buy their next property. He says: “House prices have done well so people have built up capital in their properties but the rise in professional landlords shows that many people are getting a decent amount of surplus between the money coming in from rent and money going out on mortgage payments.”

Cotton is not surprised that some people are taking the leap to manage their properties full-time.

He says: “Increasing a portfolio is not something that you can do here and there so it is not surprising that, as the buy-to-let market has grown, people are taking the leap to maintain and manage their properties full-time.”

The A&L report shows that professional landlords tend to be younger than non-professional landlords.

Gardner says: “Most young buy-to-let investors are dynamic and aggressive, take slightly more risk and tend to increase their portfolios more rapidly. When buy-to-let took off, younger, more ambitious types steamed in and took it up.”

Beech says: “Younger people see buy to let as a successful investment that does not require technical skills. It is very accessible and people are more aware of it.”

But are full-time landlords better landlords?

Cotton says yes, in theory. “If it is your main source of income, you should make a job of it and take time finding the right properties and tenants. You have got to treat it like a business and manage it well,” he says.

But Cotton says people are probably saving on the cost of letting agents and management agents, opting to do it themselves, which could present problems.

Mortgages plc head of marketing Julian Wells says: “If you are focused on it, you should be able to give it more attention but sometimes letting agents can be more adept. People need to take care to make sure that they are clear on the rules and not just looking at the financial benefits.”

Recommended

Towry Law buys Baker Tilly FS

Towry Law has announced today the acquisition of Baker Tilly Financial Services, the financial advisory division of accountancy firm, Baker Tilly.Baker Tilly FS has a national presence with over 20,000 high net worth clients. It will bring 41 wealth advisers into the JS&P Towry Law advisory firm, creating a total of around 200 advisers. All […]

EIS raises glass to the cellaret

Fine wine merchant The Cellaret is looking to raise up to £1.5m through this EIS to expand its trading activities following last year’s acquisition of The Wine Portfolio and Wine Direct.

Smoked out

Gregor Watt looks at the cash benefits from kicking the cigarette habit.

Ingenious offers lead fund to retail market

Ingenious Asset Management, the asset management arm of Ingenious Media, is to open up it’s main UK equity fund to retail investors by lowering the minimum investment fee from 50,000 to 3,000.

Inheritance Tax, a tax on the wealthy? Urban myth or fact?

By Kim Jarvis, Technical Manager with Canada Life’s ican Technical Services Team. Inheritance tax has been around in some form since 1796. Estate duty dates back to 1894 and over the years this tax has evolved into the inheritance tax (IHT) we know and love today, which was introduced in 1986 as a replacement for […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com